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Nigeria’s banking crisis over – AMCON

By Omoh Gabriel with agency reports
LAGOS — Managing Director, Asset Management Company of Nigeria, AMCON, yesterday, said Nigeria’s banking crisis was over and the sector’s earnings should see a substantial recovery when results come in for the first quarter of 2012 just as the Central Bank of Nigeria, CBN, has disclosed that the nation’s external reserves rose by 3.63 per cent.

The CBN said Nigeria’s foreign exchange reserves jumped by 3.63 per cent on the month to $36.05 billion on April 12, their highest in more than one year. The forex reserves stood at $34.47 billion a year ago and were at $34.74 billion a month earlier.

AMCON was set up in 2010 to clean up the banking system in the country following a $4 billion rescue of nine lenders that came close to collapse.

Speaking to the Reuters Africa Investment Summit in Lagos, AMCON CEO, Mustapha Chike-Obi, said earnings in the banking sector would recover well in the first quarter of 2012, after suffering last year because of write-downs on bad debt.

“The numbers we’re seeing in the first quarter are very robust,” he said, adding that three nationalised banks were all now profitable. We should wait to the second quarter of this year before passing judgment — I will not tell you that nothing surprising can come up — but the banking crisis of 2007-2009 is over.”

The banking sector was the second worst performing index on the local exchange in 2011, falling 32 percent, with only oil and gas doing worse. Seven out of 15 local lenders listed on the exchange have announced 2011 earnings, with most posting higher-than-expected loan losses. FCMB has reported a loss while UBA issued a profit warning. Diamond Bank also reported a loss last year, but swung back to profit in the first quarter.

Nigerian banks now healthiest

“Nigerian banks are now the healthiest banks in the world in terms of asset quality and capital,” Chike-Obi said. He said AMCON was now the largest institutional holder of Nigerian bank stocks “and we’re happy to hold them. We’re not selling.”

AMCON plans to refinance its N1.7 trillion  three-year bond with maturities of somewhere between seven and 10 years when the debt expires next year.

Chike-Obi said they were not yet at the stage of seeking investors for the bond, and that a preliminary roads now in New York, Boston and London next month was more about explaining what AMCON is doing than marketing new debt issues.

Forex reserves up 3.6%

Nigeria’s foreign exchange reserves jumped by 3.63 per cent on the month to $36.05 billion on April 12, their highest in more than one year, the latest central bank data showed, yesterday. The Nigerian forex reserves stood at $34.47 billion a year ago and were at $34.74 billion a month earlier.

Though the reserves have seen declining in the past three years despite rising oil prices, gradual reduction in demand for dollars at the bi-weekly forex auction this year has meant the central bank spends less of its reserves to support the naira.

Nigeria relies on crude exports for more than 95 per cent of its foreign exchange earnings and investors watch reserve data closely to gauge the defences Africa’s second largest economy has against a potential dip in oil prices.

“FX reserves have picked up marginally in recent weeks as dollar demand at the WDAS (foreign exchange auction) window dissipated amid improved naira confidence,” said Samir Gadio, senior strategist at Standard Bank. He said the increase in reserves is still modest. Gadio said the Excess Crude Account (ECA), meant to deposit savings to cushion against future oil price falls, is constantly raided and shared among the three tiers of government, which prevents a faster rebound in overall forex reserves.

“Our take is that these improvements are due in part to the sharp fall in imports of petroleum products in Q1 (first quarter),” FBN capital’s Gregory Kronsten wrote in a note to investors and forwarded to Reuters on Monday. The government slashed fuel subsidies in January, as a compromise, after a public outcry against plans to scrap them altogether.

“The fuel subsidy cut in January, although a retreat from the proposed deregulation, should bring lasting gains in terms of fx savings,” FBN capital said.

 


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